Know-How Exchange : Research/Metrics

Yes, small businesses need market research. But they often aren't doing it at a level which professional marketers would call market research.

For example, I helped a friend open a bicycle shop. he and his wife did a lot of the market research. To start with, he had worked in bike shops all his life, so he had a good foundation. His wife and I were also avid cyclists, so we also had a decent foundation. But, we didn't know everything we needed. So we figured out the info needed and asked people who might now to get info from them.

We also looked at competitors and mapped out their shops with different size circles based on how we felt they competed with us (closer competitors to what we wanted to offer got larger circles). This map helped determine the optimal location - one with customers but not a lot of competitors.

In another case, I worked with a B2B software start-up. Our method of market research was to talk to prospective customers and find out their pain points and make sure our product met those needs.

Assuming "small business" means self-funded start-up, there usually is no finding for a market research program (and usually none for consultants - as I have learned the hard way). if you definition of "small business" would go to those who have 6 figure or more angel funding of some sort, then there could be funding for better market research.

I agree with Peter that small businesses need to conduct market research and while their budgets can pose a challenge to conducting research, there are still some avenues they can pursue:

1) One method is to use the internet, to either look for secondary studies that have already been published which might be somewhat relevant, or to keep tabs on stories in the media which include information about the target audience, competitors and the industry overall.

2) Some internet methodologies have helped to bring costs down somewhat, but many require some investment (both time and money). One of the biggest costs is to outsource sample, and it can help if the client has an internal database (in which case, it is likely that they will still have to purchase some sample, but perhaps less than if there wasn't any.)

3) As Peter mentions, talking to prospective customers, expanded to include competitor's customers, and those who have purchased before but may have left the category.

4) Sometimes it can make sense to hire a market research consultant for just a few hours. In this case, the expert can make sure the survey instrument is worded well and has correct measurements, structure study design, analyze some data the business collects, suggest methodologies, etc. A small investment can help the client to get some customer information while avoiding potential problems that can arise out of incorrectly capturing customer data.

Hope this helps!

Dear Steve,

All right, time for me to stick my neck out.

Market research does NOT need to cost an arm and a leg. And yes, small businesses need to conduct surveys. Put it this way: how can you know what your customers really need if you can't
be bothered to get off your backside and AKS them?

The days of same old service are DEAD, which means all business owners need to become smarter about meeting the needs and exceeding the expectations of their customers. Even, yes, if this means meeting unmet needs: things the customer didn't know they needed until that service or solution was offered to them.

"But" cries the lame-assed business owner with no imaginations "How can you meet an unmet need if you don't know about it?"

Answer, you can't. So bloody well ask people!

There are those who would tell you that market research has to
be carried out by professionals with clip boards, slide rules and
all kinds of complex computing gear, but I believe they're wrong.

However, the thing here is not what you shell out for market research as an upfront cost, it's what it costs you if you DON'T do it. Think about this for a moment.

When you see market research as an expense, guess what: that's what it becomes. And when you see it as an investment and guess what again: that's what it becomes.

So, how do you want to slice it? How do you want to see the future? As full and brimming with possibilities? Or as a lame little piece of crap?

Now, what does a small business owner do here? Well, what you don't do is blame a lack of resources in the guise of money, time, staff, questions and so on (Tony Robbins taught me this: yes THE Tony Robbins).

Instead what you do is seek out new ways of becoming resourceful: the key element of blame in failure here is not a lack of resources; it's a lack of resourcefulness—there's a universe of difference between the two and when we lack the ability to find a way, we suffer.

Know all the stuff in the media about the economy going down the pan? It's bullshit. "Oh, woe is us, the sky is falling in and business is failing!"

Crap!

Businesses do not fail, PEOPLE FAIL. (Read that again).

Businesses fail as a direct result of some action taken or not taken by the owners, the managers, the lenders, and the people who are supposedly in charge. The root causes here are fear, stupidity, ignorance, guilt, shame, and greed. the net result is that often, no one—NO ONE—takes responsibility.

Know why the economy has suffered and will continue to suffer? Because no one has taken responsibility. Meanwhile, fingers get pointed at Mr. Obama (poor bugger), his administration, his policies, and at God alone knows what other false causes (because they are NON causes), and do you know why? Because it's EASIER to blame someone else—ANYONE ELSE—than it is to say "Yup! We screwed up. But here's our plan as to how we're gonna fix things!"

So small business owners grow a pair and they must take responsibility for their own market research, even if they must, if necessary, fight dirty, get creative, come out slugging, or, at the very least, they fight smarter, leaner, wiser, and cheaper.

The best kind of market research you can do is simple, at the register stuff where you ask people what they like to see, or what they need, or what they like and then you move Heaven and Earth and y'all GIVE it to them.

Small businesses are WAY closer to their customers than bigger outfits will ever be. This gives a certain amount of lateral pull, a certain degree of influence. When small business owners get close to their customers, all kinds of barriers that would normally by there in the case of bigger concerns tend to evaporate.

As a small outfit, you only have to ask a few questions to get a big result, and the result can be anything. If asking 100 customers 5 questions brings you a 20 percent hike in monthly revenue at no immediate cost to you, other than the time it takes to ask the questions and write down the simple answers, then that's a spike in revenue you would not have seen had you not asked, or had you spent a few grand commissioning a market research company to do.

I don't think market research has to be complicated to be useful or valuable: simple questions can bring simple answers, but often it's a simple answer that's needed to solve a complicated issue.

Why make it any more complex than it needs to be?

But market research is only as good as the people that make use of it. You can ask all the questions in the world and get all kinds of great data, but if your findings are that people like purple widgets and you sell only orange widgets because you LIKE orange widgets and you're going to CONTINUE selling orange widgets—DESPITE MARKET DEMANDS, then quite frankly you deserve to go out of business.

Why? Because you are NOT meeting the needs of your customers.

I hope this helps. Good luck to you.

Gary Bloomer
Wilmington, DE, USA
Follow me on www.twitter.com @GaryBloomer

Hi Steve,

Having just completed an extensive project with a SME (a Dutch furniture manufacturer employing 80 people), I am very happy with the experience: as compared to working for large companies:

1) yes, cost (especially upfront nominal fees) is an issue, but we used vouchers (co-funded by the company and the government, which typically has SME initiatives) and the firm was much more open than large firms to result-based payment (great for us, as we succeeded in yielding a fourteenfold higher profit increase than the control region in a field experiment). As for time, the company had just hired their first official market research person, and training her become our priority. Still, the CEO and founder made the time to discuss the results with us regularly, which is unusual in a large firm.

2) smaller companies often do not have the inside policital resistance against shifting budgets around based on your market research, and hence are more willing to experiment. Moreover, they have typically not tried a hundred market research approaches in the past, and thus are less cynical about their usefulness. As a result, the incremental value of your market research is often very high - yes, they do need to conduct marketing research! In this case, we found that the offline activity they spent 70% of their marketing budget on was ineffective, while an online activity they spent 13% of their budget on, was very effective. To our surprise, they agreed to cut the budget on the former activity by half (no large company has ever done so based on my advice :-) and to double the online activity. And this in a field experiment covering their full market...so we could clearly show the profit impact of our advice. It took us only a few weeks to get their 'go', and only a week to implement the experiment...and it is easy working with them to develop a marketing dashboard for future what-if analysis.

3) finally, this SME company was also the first one that did not mind us sharing the story in public - we presented with them last week as a finalist for the 'Practice and Impact of Marketing Science' prize.

In sum, I encourage you to pursue this path and wish you all the best!

I think a lot of the answer depends on what you mean by a small business.

In the United States, about half the people with jobs in corporate America work for businesses with 500 or more employees, and the other half who work in corporate America work for businesses with fewer than 500 employees. Typical news commentators in the United States refer to businesses with fewer than 500 employees as small businesses.

there is a somewhat outdated but quite interesting breakdown of the size of firms in the US here:

https://www.census.gov/epcd/www/smallbus.html

The overwhelming majority of firms in the United States employed less than two employees (the majority of firms have zero employees). When I was in business, almost all of my clients had five or fewer employees. I am sure all of my former clients need marketing research, I am also sure that none of them will pay for it.

I agree with the above comments that the owners of very small firms conduct informal marketing research, and clearly this is better than nothing.

But if I were personally opening a market research firm, I would focus my marketing efforts on firms with between 20 and 200 employees. Good luck.

Yes, there's a need.
No, there's generally not a budget for it.

Research builds confidence for action, which is necessary for investors and others needing buy-in. But it's not very useful for Black Swan offerings - something paradigm-shifting that people don't know they need until after they see it.

Research also produces data, which requires wisdom to discern where the value is buried. You may start to do research on one topic, and may uncover "gold" lurking in the data if you're careful and understand the underlying psychology and statistics involved.